Realizing the Potential of China’s G20 Presidency

In the run-up to September’s G20 summit in Hangzhou, China, there has been much talk about strengthening global macroeconomic cooperation and reforming the international monetary system. This is far from the first time these topics have come up, but the time may be ripe for genuine progress.

NEW YORK – In the run-up to this September’s G20 summit in Hangzhou, China, there has been much talk about strengthening global macroeconomic cooperation and reforming the international monetary system. While this is far from the first time these topics have come up – in 2011, for example, France pushed for monetary reform, but was waylaid by the eurozone crisis – the time may be ripe for genuine progress.

Today’s global economy is plagued by uncertainty. Inconsistent data have lately raised questions about the strength of the United States’ economy. When it comes to Japan, the data are even more erratic. The European Union faces not only a still-weak recovery, but also the possibility of losing the United Kingdom as a member.

The emerging world, meanwhile, is experiencing a sharp economic slowdown. China, in particular, poses a significant risk, with many fearing that its downturn will be more severe than initially anticipated. This has spurred many to move their capital out of the country, generating strong downward pressure on the renminbi.

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The need for economic reform is acute & long overdue. However, one is sceptical of any forward looking reforms at the G20 in China and the reasons are many. China is in the eye of the storm with the onerous task of untangling itself from the South China Sea imbroglio. Once a keen stakeholder at reshaping global monetary system, China today, finds itself in a rather unenviable corner on the SCS issue with most countries wary of its intentions & its adherence to international rule of law. In such a situation, China would be on the backfoot at the G20. The enthusiasm with which it pushed for inclusion of renminbi in the SDR basket would give way to rearguard action in explaining itself to member countries of its intentions.
Structural reforms in the international monetary system would likely be overshadowed by the terror attacks in quick succession across the world. Hence, an in depth analysis & solution to economic systems is unlikely.
Currency gyrations & negative interest rates across countries is also likely to exercise the participants but a clear & doable roadmap might be elusive. Europe has bigger problems of migrants & refugees & its economic cost. Brexit will also dampen European interest at pushing reforms at the summit. The US, of course, would be in the midst of elections & represented by a lame duck administration.
Hence nothing substantive is likely to come out of the summit save maintaining status quo.

The G20 perhaps holds the greatest potential for future international cooperation and development of any Global organisation. It's most significant prize would ultimately be to replace the existing WTO system for international trade with a single regulated Global market, giving market access to 85% of Global GDP and 4.5 billion Global citizens. However, two principles are critical to achieve such a big long term objective.

Firstly the aim of such cooperation must be seen from the outset as Global. This means supporting implementation of the UN Global Goals and providing development assistance to Least Developed Countries (LDCs) around the World, including those in Africa and the Middle East which offer some of the greatest potential for productivity gains and future Global growth.

Secondly, but equally critical, is that the G20 comes to be seen as a group that works to further the interests of ordinary citizens, and not just as a vehicle to advance opportunities for Global corporations. For too long our outdated models of economic growth have been based on exploitation of others, abuse of human rights, and selfish consumption of the World's non-renewable resources. If the G20 is to gain public support for future trade agreements it must show that it can strike a new balance between the interests of capital and those of ordinary citizens.

Priorities should include ending the “race to the bottom” in Global taxation by eliminating tax havens, insisting on transparent country by country tax reporting for Global companies, and agreeing minimum rates for marginal taxation. Such a commitment would be highly popular with voters and demonstrate G20 commitment to build a new Global economic model that works in the interests of every Global citizen. Equally urgent should be a commitment to coordinate a universal carbon tax, levied across all G20 nations, to prevent further Global warming while maintaining a a fair and level playing field for Global competition.

Voters have now rejected all our existing models for international cooperation. The EU model was rejected by the recent Brext vote, and the rise of anti-trade sentiments has been reflected by all candidates in the US Presidential race. The G20 is starting with a clean sheet and has huge potential to improve life for billions of people on our common planet. If we are to make the most of this opportunity we must however learn from the mistakes that have today left too many people behind in The Global Race.

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